Unemployed Americans attend a job fair on the first day of the Labor Day long weekend in the City of El Monte outside of Los Angeles on September 4, 2010. US unemployment jumped to 9.6 percent in August, the Labor Department said, showing the recovering economy is still struggling to create jobs. In a keenly awaited unemployment report, the department said the economy lost 54,000 jobs last month, a better figure than the 120,000 loss expected by economists. The figures are seen as a crucial litmus test for the sputtering economic recovery and President Barack Obama's policies.

California's 12.4 percent unemployment rate is worse than the U.S. rate of 9.6 percent primarily because construction spending here has dramatically slowed largely due to a plummet in home building, according to a report released this week by an independent economic research group.

The report from the Center for the Continuing Study of the California Economy is especially pertinent during an election year in which candidates claim they can fix the state's jobs problems and toss allegations that California is so unfriendly to businesses that they are fleeing the state.

"The pain here in unemployment is worse than that in the nation but (that is not due to) business climate issues," said Stephen Levy, director of the center in Palo Alto and author of the report. "It's pretty straightforward that we were harder hit by the construction downturn."

Roughly 600,000 jobs, almost half of those the state lost, were tied to construction and related sectors like building materials, finance, real estate and furniture, as the state went from annually building 200,000 homes to building 35,000 last year.

The state's unemployment rate has outpaced the national rate several times previously.

In the 1990s, California's unemployment rate was similarly higher than that of the nation when the Southern California aerospace industry collapsed. In 2000, the implosion of the Bay Area's dot-com industry also caused joblessness to peak.

"We had whole sectors turned on their heads somewhat permanently, whereas this is a cycle," Levy said. "Those jobs never came back. This time is different."

He expects construction spending to slowly return after a year or two, then steadily increase annually. After five years or so, the state might support building about 150,000 homes annually, compared with 200,000 a year at peak, because the population will grow by about 400,000 to 500,000 per year, he said.

About two-thirds of the construction slump was due to the plunge in new-home starts; the rest is because of declines in commercial construction such as office buildings and infrastructure projects.

After removing manufacturing jobs related to construction, the report shows that manufacturing jobs in California declined at the same pace as the national average.

A particular bright spot for the state's future is that venture capital funding here is strong and rising. California now captures about $1 of every $2 that VCs invest nationally, Levy said.

"That's more than at the height of the dot-com boom," he said. "That record funding in California (comes from) the people who have the most choice."